U. S. Securities and Exchange Commission
Litigation Release No. 18333 / September 9, 2003
SEC v. Kris Klinger (U.S. District Court for the Southern District of California, Civil Action No. 03 CV 1785J(JMA))
Former Bank Loan Officer Charged With Fraud In Insider Trading Scheme
The Securities and Exchange Commission today charged a former bank loan officer, Kris Klinger, of Oceanside, California, with using inside information to purchase securities in Crossman Communities, Inc. shortly before the public announcement that Crossman would be acquired by Beazer Homes USA Inc. Simultaneously with the filing of its action, the Commission accepted Klinger's offer of settlement, in which he agreed, without admitting or denying the allegations, to a court order enjoining him from future violations of the securities laws and requiring him to pay approximately $18,000 in wrongful trading profits and penalties.
According to the complaint filed in the United States District Court for the Southern District of California, Klinger, in the course of his employment as a vice-president and senior loan officer at Washington Mutual, Inc., obtained material non-public information that Beazer, a Washington Mutual customer, was planning to acquire Crossman. Based on that information, Klinger purchased 700 shares of Crossman common stock on January 28, 2002. On January 30, 2002, Crossman and Beazer issued a joint public announcement about the acquisition, and Crossman's stock price increased approximately 47 percent from the previous day's closing price. On January 31, 2002, the day after the acquisition was publicly announced, Klinger sold his entire holdings of Crossman shares, generating trading profits of $9,135.
Until its acquisition, Crossman was a home building company based in Indianapolis, Indiana, whose securities were registered with the Commission and traded on the Nasdaq National Market System. Beazer is a home building company headquartered in Atlanta, Georgia, whose securities are registered with the Commission and traded on the New York Stock Exchange.
In order to settle the charges, Klinger agreed to the entry of an order permanently enjoining him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5 thereunder. Additionally, Klinger agreed to pay disgorgement of $9,135 in illegal trading profits, plus $297.13 in prejudgment interest; and to pay a civil money penalty equal to his trading profits in the amount of $9,135.
In accepting Klinger's settlement, the Commission took into account Klinger's significant cooperation in the staff's investigation, including the fact that he voluntarily contacted the staff to self-report his trades and worked with the staff to resolve this matter promptly.